Pennsylvania Real Estate Investment Trust (NYSE:PEI), a US$797.64M small-cap, is a real estate company operating in an industry which is the most prevalent industry in the global economy, and as an asset class, it has continued to play a crucial role in the portfolios of various investors. A real estate investment trust (REIT) is a collective vehicle for investing in real estate that originated in the US and has since been taken on board globally. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year . Is now the right time to pick up some shares in real estate companies? Below, I will examine the sector growth prospects, as well as evaluate whether Pennsylvania Real Estate Investment Trust is lagging or leading its competitors in the industry. See our latest analysis for Pennsylvania Real Estate Investment Trust
What’s the catalyst for Pennsylvania Real Estate Investment Trust’s sector growth?
Issues around rate hikes and yield changes have made investors sceptical of REITs. The capacity for these investment vehicles to absorb a rate hike should be considered, hence, factors such as lease durations and pricing power in the market would require a deeper dive. In the previous year, the industry saw growth of 3.14%, though still underperforming the wider US stock market. Pennsylvania Real Estate Investment Trust lags the pack with its negative growth rate of -96.69% over the past year, which indicates the company will be growing at a slower pace than its REIT peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 82.62% in the upcoming year. This future growth may make Pennsylvania Real Estate Investment Trust a more expensive stock relative to its peers.
Is Pennsylvania Real Estate Investment Trust and the sector relatively cheap?
The REIT sector’s PE is currently hovering around 20.17x, relatively similar to the rest of the US stock market PE of 18.88x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 7.46% compared to the market’s 10.49%, potentially indicative of past headwinds. Since Pennsylvania Real Estate Investment Trust’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Pennsylvania Real Estate Investment Trust’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:Pennsylvania Real Estate Investment Trust’s industry-beating future is a positive for investors. If Pennsylvania Real Estate Investment Trust has been on your watchlist for a while, now may be the time to enter into the stock, if you like its growth prospects and are not highly concentrated in the REIT industry. However, before you make a decision on the stock, I suggest you look at Pennsylvania Real Estate Investment Trust’s fundamentals in order to build a holistic investment thesis.
- 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 2. Historical Track Record: What has PEI’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Pennsylvania Real Estate Investment Trust? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!